Wealth of experience at Golden Iron

Micro-cap miners are sometimes long on exploration skills and short on business models and strategy. Golden Iron Resources, the 18th gold company to float this year, is almost the opposite. The Perth-based company is run by Michael Wolley, the former chief operating officer of
Lynas Corporation
, an ASX 200 producer of Rare Earth materials.

Kelvin Ryan, former executive general manager and director of
Downer EDI
Mining, chairs Golden Iron. Three other independent directors bring mining services and business experience.

None are practising geologists, an issue Golden Iron will address by recruiting a director with such credentials to its five-man board.

Wooley, a former
BlueScope
Steel executive, and Ryan have deep production experience. They met when Downer EDI worked on the successful commissioning of Lynas’s Mt Weld project.

AFR
AFR

Golden Iron already has a small joint ore reserve committee (JORC) resource of 161,480 gold ounces, mostly from its Mt Dimer and Newfield projects in West Australia. Mt Dimer was mined from 1990 until de-commissioning in 1997. It produced 133,000 gold ounces from ore grading 6.5 grams a tonne, and 183,000 silver ounces.

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Mt Dimer’s first owner, WMC, abandoned the project because the gold mineralisation did not suit its exploration strategy. Some redundant WMC employees bought the tenements and later sold them to
Tectonic Resources
, a junior explorer that walked away from Mt Dimer after mining it for three years.

Low gold prices in 1997 made Mt Dimer uneconomical. The tenements eventually found their way to Golden Iron after it withdrew its first float in 2008 because of the global crisis.

A third Golden Iron project, Gwendolyn, has returned promising surface sampling results for direct shipping haematite iron ore. But the focus is gold. In all, Golden Iron has seven projects; two are ready to mine. Several granted mining and exploration licences should lower regulatory hurdles.

The strategy involved buying tenements with previous production history in well-known gold producing areas, with JORC resources and nearby infrastructure.

Most of all, Golden Iron sought potentially high-grade, underexplored projects. Mt Dimer has not had a drill hole since WMC owned it.

The business model is based on a “hub-and-spoke" strategy where several high-grade, low-tonnage projects feed a central production facility.

The immediate goal is getting the JORC resource above 500,000 ounces by year’s-end through reinterpreting a large body of geological data from WMC, and new drilling.

Results from three-dimension digital resource modelling and aeromagnetic surveys will provide early news flow after listing.

The 2011 plan involves more exploration to upgrade the JORC resource and small production – possibly 10,000 to 15,000 gold ounces if current grades of 4.6 grams per tonne at Mt Dimer’s measured resource are maintained.

If this happens, Golden Iron could get early cash flow to accelerate exploration and avoid issuing more shares and diluting the price.

The 2012 plan involves adding other tenements to the portfolio and possibly a feasibility study for a treatment plant costing as much as $45 million.

It is an extremely ambitious timetable to drill a project for the first time in more than a decade and achieve serious production three years later.

Golden Iron believes having two drill-ready projects and considerable infrastructure built during past exploration gives it a chance.

Golden Iron is seeking a minimum $3.5 million by issuing 17.5 million 20¢ shares. Total issued capital upon listing is 64.5 million shares for a $12.9 million valuation.

About 47 million shares, at 8¢ or 10¢, were issued last year. Twenty-four million shares are escrowed for a year, and 15 million for two years.

The remaining 8 million shares, half owned by Golden Iron directors, can be sold after listing. Directors have not been granted options.

The challenge is convincing investors who own the other 4 million shares to hold them and avoid pressuring the share price after listing.

Golden Iron is planning a loyalty offer of a 1¢ option for every three shares held a few months after listing. Such tactics can create a “sticky" capital structure.

Golden Iron has a more compelling valuation than several recent small gold floats.

But similar to many speculative floats, the offer was extended due to an indifferent market for such capital raisings.